Tag: Newsletter – March 2019

Student Loans or Credit Card Debt—Which Do I Pay Off First?

Pete the Planner puts together a motivating and realistic blog and website for financial planning. Here he answers a question that so many have been faced with; how to prioritize your debts. In this post, he gives a simple equation on his reasoning, in a light-hearted tone.

Pete ranks it as the following:
1. Pay off all student loans. Those are usually at an extremely high rate and many people don’t know the interest is still being charged even though payments aren’t due until after graduation.
2. Make arrangements to create an emergency fund.
3. Work on paying off your credit card debt completely.

Click here to read the full post.

SALT State and Local Taxes: How Nonqualified Plans Can Help Protect Retirement Income

Fulcrum Partners shares, the tax overhaul signed into law in December 2017 (Tax Cuts and Jobs Act) set a $10,000 cap on state and local tax (SALT) deductions that can be taken from US federal income taxes. High-income earners who live in areas where state and local taxes are steep, such as California, New Jersey, New York and many other venues, are getting an eye-opening wakeup call as they face the impact of their first tax season under the new laws.

Some residents in high SALT states have chosen to relocate to more tax-friendly parts of the country. Others have tried to relocate on paper without actually doing so—a workaround that doesn’t always bode well for the taxpayer.

High-Earners Cutting Back on SALT: State and Local Taxes
Given that many high-earning executives spend a great deal of time traveling and that they may own or lease multiple homes, accurately identifying which city and state is their official state of residence can get into interesting gray areas.

Consider this example where a dog proved he’s truly man’s best friend.


A New York executive accepted a high-profile CEO position with one of his company’s subsidiaries based in Dallas. After a period of commuting between the Big Apple and the Big D, the executive decided he like Dallas enough to rent an apartment there, lease a car in Texas and join a local gym. He filed state and federal taxes as a resident of Texas.

Two years later, the executive was promoted again, and returned to New York. The State of New York then attempted to collect two years of state taxes, nearly a half million dollars plus interest and penalties, claiming that the executive had never truly relocated to Dallas at all.

A judge however, ruled in favor of the executive based on the fact that he ultimately had relocated his elderly dog to Texas, which in the eyes of the judge made it an official move.

Rarely is the issue of where an executive spends most of his or her work time or whether the executive owns or rents residential property in the new city sufficient for determining the authenticity of the move. Many details, and not always a lot of logic, can come into play in determining whether a person has sufficiently demonstrated a change of lifestyle, such that it constitutes a true relocation. Even relocation plus retirement may not always, protect your earnings from the long arms of a state where you previously lived as a taxpayer.

Source Tax Law – Nonqualified Plans Can Help Protect Retirement Income from Taxation by Former States of Residence
Typically, an individual is subject to income taxation by the state in which he or she lives when the income is received. Some states, however, attempt to tax nonresidents on this income on the basis that it was earned, or had its source, in the first state.

Retirement income has always been a key target of this type of state taxation. Under the federal “Source Tax Law,” however, retirement income meeting certain conditions will be taxable only by the recipient’s state of residence at the time of payment, regardless of its “source”.

The Source Tax Law generally protects current nonresidents from being taxed on retirement income by states where they previously lived while employed. It covers retirement income paid from tax-favored vehicles such as tax-qualified retirement plans and IRAs. It also protects income from nonqualified deferred compensation arrangements if the income either is paid from a certain type of plan or in substantially equal periodic payments over life or life expectancy or a period of at least ten years. Thus, properly structuring deferred compensation payouts (including compliance with Internal Revenue Code § 409A may provide significant state tax savings, depending on the states involved.

To learn more about the impact of state and local taxes on retirement earnings, contact the team of executive benefits professionals at Fulcrum Partners.

Reposted with permission from Fulcrum Partners. View their article here.

SRP’s Own Jim Robison Highlighted in 401(k) Specialist Magazine

Jim Robison, Managing Director Great Lakes, was recently interviewed by Ross Marino with 401k Specialist Magazine. Take a look into what has shaped him into an elite 401k advisor with over 25 years of experience. “What worked best was taking the time to learn from others in the retirement plan consulting arena and to gather observations and learn wisdom form them that is usually easily transferable to my own situation”, he explains. Get to know some of Jim’s professional and personal routines, from skills that are essential for advisors, to how he refreshes himself by working on the family farm.
Click here to read the full interview with Jim Robison.

Department of Labor Issues Relief Guidance for Victims of California Wildfires

The U.S. Department of Labor (DOL) recently issued benefit plan guidance and relief for plans and participants affected by the 2018 California Wildfires. The DOL recognizes that plan sponsors and participants may be affected in their ability to achieve compliance with various regulatory requirements. The guidance generally applies to all parties involved in employee benefit plans located in areas identified by FEMA as disaster areas, listed here: www.fema.gov/disasters.

The guidance provides relief from procedures related to plan loans and loan repayment, distributions, contributions and blackout notices. In general, the DOL will not take enforcement actions if plans follow the guiding principle to act reasonably, prudently and in the best interests of workers and families who rely on the plans for their economic well-being.
Specific guidance is offered in certain areas:
• Loans and Distributions: Plan sponsors must make a good faith effort to follow procedural requirements under the plan, but the DOL will not assist with requirements and if unable, make a reasonable attempt to assemble any missing documentation as soon as practicable.
• Participant Contributions and Loan Repayments: The DOL recognizes that some employers in these disaster areas may not be able to forward amounts withheld from employee wages within prescribed timeframes. Employers are required to act reasonably, prudently and in the interest of employees and comply with the regulations as soon as practicable. The DOL will not take enforcement action if timelines were not met solely due to the 2018 California Wildfires, in the FEMA-identified areas.
• Blackout Notices: Generally, 30 days’ advance notice is required when a participant’s rights under a plan will be temporarily suspended, limited or restricted due to a blackout period. The DOL regulations provide an exception to this requirement when the inability to provide notice within the required timeframe is due to events beyond the plan sponsor’s or fiduciary’s control.

The full DOL fact sheet can be found here. Your advisor is available to answer any questions you may have or help you determine practical approaches to meeting fiduciary duties and requirements.